PARTNERSHIP FIRM
The formation of a partnership is governed under Indian Partnership Act, 1932. A partnership involves two or more persons, who come together to form a business and divide the profits in an agreed ratio. Partnership agreements are easy to form as compared to companies, but still they require careful drafting and signing of documents by all participants.
How to Form a Partnership Firm?
Step 1: Submit an Application for Registration
Step 2: Selecting a Name for the Partnership Firm
Step 3: Registration Certificate
Essential Elements of a Partnership
The formation of a Partnership necessitates the presence of several key elements.
An Agreement
The formation of a partnership occurs when two or more people agree to work together. It should be noted that this type of deal can only arise from a contract, not from status. Unlike a Hindu Undivided Family conducting business within the family, a partnership is not a family business. The reason for this is that this type of alliance can only be formed through mutual agreement. Due to this, partnerships are both voluntary and contractual.
Sharing Profit of Business
Running the Business
The third requirement for a partnership is that the business be run by all of the partners or by one or more of them acting on their behalf. This is the foundational principle of partnership law. An act of one partner in the course of the firm's business is actually an act of all partners. A business partner is both the principal and the agent for all of the other partners. As a result, it should be noted that the true test of a partnership is mutual agency rather than profit sharing. There will be no partnership if the element of interactive agency is missing. The only Prima Facie evidence that can be used is benefit sharing.